QYLD vs. JEPQ - Which is Best For You?
QYLD and JEPQ are popular options selling income ETFs designed to hold
Let’s take a deep dive into their differences and performances and determine which one should be the crown jewel in your investing portfolio.
Overview of QYLD vs. JEPI
While both QYLD and JEPQ have a primary focus on the NASDAQ-100 index, their management strategies mark a fundamental difference.
QYLD, employing a passive management strategy, hinges on selling covered call options on the NASDAQ-100 index. The premium collected on these option sales is distributed among investors as dividends. This transparent strategy means its future action is predictable, making it an attractive choice for those who prefer certainty overabundant growth.
JEPQ, an actively managed fund, operates differently. It has many tools at its disposal, including options and futures contracts, aiming for significant returns alongside the distributions. For investors willing to embrace some unpredictability for potentially higher gains, JEPQ could represent an appealing portfolio addition.
Expense Ratios Compared
QYLD - 0.60%
JEPQ - 0.35%
Looking at the ‘fine print’ involves analyzing the expense ratio. Essentially, this denotes the cost you’re paying for the fund to be managed.
QYLD charges investors a relatively modest 0.60%, which is fair considering its strategy’s choreographed nature.
Yet, JEPQ wins this round with an even lower rate of 0.35%. Choosing JEPQ would save you 25 basis points annually. These saved expenses, over the long run, can significantly enhance portfolio performance.
Dividend Yields Compared
The crown jewels of QYLD and JEPQ lie in their dividends. Both JEPI and QYLD have wildly varying dividend yields ranging from 6-12%, depending on market conditions.
You can expect steady dividend payments from these ETFs, but the yield will also change fairly consistently.
Holdings Comparison
Both QYLD and JEPQ house the NASDAQ -100’s best and brightest. The likes of Apple, Microsoft, and Amazon are represented, but the proportions vary due to the active management of JEPQ.
As a result, JEPQ could adjust its portfolio to leverage high-performing assets better, while QYLD strictly adheres to its principle of covered calls on the whole index.
Performance Comparison
There’s no clear winner here, as the outperforming fund varies depending on market conditions.
While JEPQ has historically outperformed QYLD, the performance of these ETFs is quite correlated. Both will provided returns that are similar to buying the QQQ and selling covered calls.
Ultimately, the best choice for you will depend on the expense ratio and whether you prefer JPMorgan or Global X.
QYLD vs. JEPI - Which is Better For You?
Depending on your tolerance for risk and strategy preference, you may find one fund more apt than the other. If you’re keen on predictable dividends, QYLD’s impressive yield and consistent payout might be right up your alley.
If you’re a believer in market growth and seek upward mobility along with steady distributions, JEPQ might serve you well. With the insights provided, I trust you’ll have a clearer idea of what suits your portfolio the most.
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FAQ
Is JEPQ Dividend Sustainable?
Consistency and sustainability are critical when considering a dividend-paying fund. Although JEPQ is relatively new (having been launched in May 2022), its payout appears to be sustainable. However, it’s important to remember that all dividends are contingent on market performance and aren’t guaranteed.
What Is the Difference Between QYLD and JEPQ?
While both QYLD and JEPQ derive their value from Nasdaq 100 stocks, the way they position themselves in the market is different. The older QYLD uses a covered call strategy, selling call options on the Nasdaq 100 Index and distributing the premium earned as dividends. In contrast, JEPQ targets both income and growth by allowing room for upside potential. It is an actively managed fund, which gives its managers the discretion to adjust holdings and strategies as market conditions change.
What Are the Risks of QYLD?
Like all investment vehicles, QYLD does carry some risks. Its use of a covered call strategy limits its upside potential during strong market rallies, and any significant decline in the index could lead to losses in the fund. Additionally, since QYLD follows a passive strategy, it wouldn’t be positioned strategically to avoid market pitfalls.
Who Are the Biggest Holders of QYLD?
Large institutional investors typically hold the majority of QYLD shares, including pension funds, mutual funds, and insurance companies that seek a regular income flow. Some retail investors are also attracted to its regular dividends and the stability expected from an index-based fund.
